GST Cuts: Quantity Of Biscuits, Snacks, Toothpaste To Increase At Lower Price End, Says Nuvama Analyst

Fast-moving consumer goods companies will likely pass on the benefits of the cuts in goods and services tax to the consumer by increasing the volume of the packaged item proportionally in products like biscuits, snacks and toothpaste.

"Biscuits and snacks will benefit. There will be an increase in grammage for items in the lower price end, like Rs 10–5 biscuits. Companies will pass on the GST cut to consumers," Abneesh Roy, executive director of research at Nuvama Institutional Equities, told NDTV Profit.

He cited a 13-percentage-point reduction in GST on items like biscuits and snacks from 18% to 5%.

In categories like toothpaste and shampoo, initially, the companies will pass on the benefit of the GST cut to consumers. But from a one-year perspective, consumption will even out, Roy said. Moreover, affordability may move some consumers from smaller brands to bigger ones.

In consumer staples, Britannia Industries Ltd., Hindustan Unilever Ltd., Nestle India Ltd. and Bikaji Foods International Ltd. are better positioned, Roy said. He believes that this new GST would also boost demand for both discretionary and non-discretionary products.

The changes in GST rates, announced by the government last week, will come into effect from Sept. 22.

The middle-class and lower-middle-class buyers are set to gain the most from the transfer of benefits by the FMCG manufacturers. However, in the FMCG space, it could take four to five weeks for the new prices to be reflected on shelves. This is due to the maximum-retail-price regime in the FMCG sector, according to Sudhir Sitapati, chairperson of the CII National Committee on FMCG, and managing director and CEO of Godrej Consumer Products Ltd.

Abneesh Roy also said the situation in Nepal could lead to a near-term disruption in the supply chain for FMCG companies. Additionally, the tourism sector's struggles may hurt the country's